New Stringent Requirements to Transfer Pricing
Documentation in Denmark
For income years beginning 1st January 2016 or later the Transfer Pricing documentation for multinational companies with operations in Denmark shall comply with more formal requirements than before. These requirements are introduced for implementing OECD’s Guidance on Transfer Pricing Documentation based on the recommendations from the Base Erosion and Profit Shifting project (BEPS).
The future documentation shall include the following three parts:
- A Masterfile including standardized information relevant for all entities in a Group,
- A local file including specific controlled transactions in each country, and
- A Country-by-Country report including information on the global allocation of income in the Group and in which jurisdictions taxes are paid.
A significant extension
The new requirements are a significant extension of the requirements to the documentation as the Masterfile shall include agreements with Tax Authorities in different countries, a description of Intangible
Assets in the Group and the Financing of the Group. Further the Masterfile shall include an Organization Chart of the Group showing the legal and the organizational structure.
The documentation shall also include a description of the commercial activities in the Group including information for 1) major Drivers for Business Profit 2) a description of the Supply Chain
3) major Service Agreements 4) a description of the major Geographical Markets 5) a Functional Analysis and 6) a description of major Restructurings, Acquisitions and Disposals for the actual year.
The Country-by-Country reporting is only applicable for Multinational Groups with consolidated revenue at a minimum of € (mio) 750. This reporting shall for each jurisdiction include information on 1) Revenues 2) Profit (Loss) before Corporate income Tax 3) Corporate Income Taxes paid (on Cash Basis) 4) Income Taxes Accrued for in the Current Year 5) Stated Capital (for branches the Stated Capital for the juridical entity) 6) Accumulated Earnings 7) number of employees and 8) Tangible Assets other than Cash and Cash Equivalents.
Only 50 to 75 Danish Groups is expected to be obliged to make a Country-by-Country reporting, however a Danish entity of a multinational group could be met with these requirements in order to meet the
requirements in another country.
Please be informed that the Country-by-Country will be distributed to Tax Authorities in other countries where the Group is present tax wise.
When shall the documentation be prepared?
The documentation should be prepared on a continuous basis and should be finalized before the deadline for making the yearly tax return for the entity to the Danish Tax Authorities. If the Danish Tax Authorities requires the documentation there is still a sixty days deadline for delivering the documentation.
Who are obliged to make such Transfer Pricing documentation?
The extended requirements for the Transfer Pricing documentation has not changed in relation to which entities are obliged to prepare such documentation and there are still less requirements if the Group has
less than 250 employees and either has a yearend balance on less than DKK (mio) 125. or yearly revenue less than DKK (mio) 250.
If a company does not comply with the rules, it can be met with fines in Denmark of DKK(th). 250. + 10% of an increase in the taxable income. Penalties in other countries may be different as well as the size of a fine.
How can inforevision help?
inforevision can help you check to what extend the new requirements are applicable to your company. Furthermore we can assist you with the preparation of the actual reporting – and documentation
Please feel free to contact our tax department for more details:
State Authorized Public Accountants
Head of Tax
Direct tel.: +45 39 53 50 33